Harrah’s going public?

Harrah’s may go public again much sooner than many people realize, perhaps by late this year.

The timing all depends on economic conditions and the speed at which regulatory approval can be obtained for a plan that has the company’s two major owners, TPG Capital and Apollo Management, and the Paulson hedge fund turning their debt holdings into an equity stake of as much as 15.6 percent, which will then be registered and sold as common stock.

"The important thing about this," a Wall Street source confided, "is that it will set a price for the company’s stock."

All the basic facts are right there in the company’s recent dry as dust announcement, although it was mostly couched in terms that probably had many readers asleep before they got to the most interesting facts. This is a tactic sometimes favored by companies that are forced to report certain activities but who are not necessarily interested in a lot of news media attention.

There are all kinds of caveats attached to this deal in the works, but its architects have their plan, a scenario that first saw the light of day last month when Harrah’s, which is a couple months away from a name change to Caesars Entertainment or something like that, announced the debt for equity exchange.

The Paulson share of the equity stake will be registered immediately as stock with the SEC and be available as common stock to anyone with an appetite for it. The Harrah’s (or Caesars) stock would not be registered immediately as the sponsors of this deal test the waters, so to speak, and hold their collective breaths, waiting to see what kind of price the stock will support.

The plan could be affected by the state of business generally (will the summer be slower than anticipated?) and the always uncertain progress toward various regulatory approvals.

As for the corporate name change to Caesars, this was originally expected to take place months ago but was delayed because of the costs associated with changing what have to be many thousands of signs – everything from marquees to monogrammed towels and so forth. Harrah’s appears to be emerging from an extended period that saw the company cut spending to the bone and then some.

If the plan continues moving forward, we can probably look for company management to resume quarterly conference calls, the ones where analysts supposedly ask probing questions about the company’s vital signs. The same calls often have hundreds of other hangers-on looking to read between the lines of whatever is said for information of interest to other deals and investors.

Private equity takeovers of public

companies such as the purchase of Harrah’s by TPG Capital and Apollo are typically done with the expectation that the target will go public again once assets have been reconfigured or rebuilt and balance sheets overhauled in whatever way seems to be necessary.

In the case of Harrah’s, much has occurred since the 2007 purchase.

The World Series of Poker has been built into a profitable monster asset that now means more to the company than most watchers ever imagined, thanks to a marketing program that gives it global appeal.

Harrah’s is also now a major player in the Pennsylvania casino business, thanks to its racino near Philadelphia. The possible legalization of racetrack slots or casinos in various areas of the East Coast from Ohio to Massachusetts will also add to the company’s future potential.

As for the Harrah’s balance sheet, the upcoming exchange will leave the company with $557 million in additional cash. Recent financial engineering means there are no significant debt maturities until 2015.

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